ATHENS, Feb 3 (Reuters) - It has been shelled, threatened with demolition and became such an eyesore that it was covered by a massive sheet during the 2004 Athens Olympics, but a historic 1930s housing complex built for Greeks fleeing Turkey is a hive of activity again.

As Greece's six-year economic slump has increased the number of homeless to 20,000 in Athens alone, NGOs estimate, the "Prosfygika" complex has become a haven for squatters and drug addicts as well as immigrants from Iran and elsewhere trying to cross into northern Europe through Greece's porous borders.

Flat-roofed and boxy, typical of the German Bauhaus school of design, the complex of eight housing blocs was considered architecturally ahead of its time when it was built in the 1930s to house some of the 1.5 million Greeks who were displaced by a 1923 population exchange with Turkey after World War One.

Today their descendants are struggling to cope with their new neighbours, reflecting broader social tensions in Greece, especially between locals and immigrants, that have intensified during recent years of economic hardship that forced Greece to require two international bailouts.

"Here, people come and go," said 76-year-old pensioner Yannis Chiotakis, one of about 30 remaining descendants of the blocs' original inhabitants, gesturing to a group of drug addicts roaming the streets.

"But I can't tolerate this. I pay for electricity, for water, for all these taxes and next door there's someone who's living for free?" he said, referring to squatters.

The complex is mostly state owned and its crumbling exterior has attracted critics who say the buildings do not belong on one of Athens' busiest streets, between the capital's police headquarters and the top court. But a 2008 decision declaring them a protected site means they cannot be torn down.

Preparing food from a soup kitchen over a donated stove in her cramped one-bedroom apartment, Emine Kilic, a Turkish mother of 10, said the family began squatting in Prosfygika two years ago when her husband lost his job as a construction worker.

"We had no choice. This is home now," she said.

A few buildings down, a Greek couple driven from their Athens home because they could not afford rent during the recession are also squatting.

Nearby, two Iranian migrants play cards and sip tea, their cigarette smoke filling the room they share with about a dozen other Iranians, all waiting to leave Greece for north European countries such as Norway, where they hope to find work.

In 2001, the state bought all but 51 apartments in the complex whose owners refused to sell. But various renovation plans fell through over the years, including tearing down the complex to build a park or converting it into guest houses for a cancer hospital.

One woman who was born and has lived her entire life in the complex recalls years of fights to save it from being torn down until Greece's top administrative court finally declared it protected property in 2008.

"There were rallies, hunger strikes, sit-ins," said 76-year-old Chrysoula Charizanou, a former seamstress who raised her three children in a one-bedroom apartment here.

DEVELOPMENT PLANS

Charizanou's parents used up their life savings to buy the tiny apartment and she laments that the complex has been left to ruin by a cash-strapped state which has dithered over what to do with it.

Without central heating, she spends evenings in thick sweaters huddled over a tiny wood-stove heater in her apartment, the outside walls of which bear shell marks from when the complex was caught in crossfire during Greece's civil war in the 1940s.

Outside, the wide, dusty dirt roads between each block, one of the few open spaces in central Athens, are jammed with parked cars and often flood with sewage from broken pipes.

"My kids tell me: 'Leave, come stay with us'. But I love this place," Charizanou said, flicking through piles of black-and-white photographs from the 1960s, when neighbours held dance parties on the roof. "I was born here and I will die here. Maybe by then something will change."

Charizanou and the remaining residents who own apartments in the complex have formed a committee and often press the local authorities to kick out the squatters and remove the graffiti that covers the outside of all the buildings. But they have been told there is no money to spare.

An official at the state company which owns most of the property, who spoke on condition of anonymity, said only that a plan to develop the property would be finalised this year.

That is creating uncertainty for the long-time residents who were born and grew up here and are determined to stay on living in Prosfygika no matter what.

Pulling up his trousers to show a scar from a bullet wound suffered as a child during the civil war, Chiotakis, the pensioner, said he had even convinced his daughter to rent the flat next door.

"I've no intention of going anywhere," he said. (Editing by Michael Roddy and Susan Fenton)

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